Tuesday, 7 July 2009

Your chance to be heard on fees for foreign currency card usage

If you've ever used an ATM card with a Visa or Mastercard logo issued in the USA to get cash in foreign currency (i.e. local currency, not U.S. dollars) from an ATM in another country; if you've ever paid for accommodations abroad in foreign currency, either with cash obtained from an ATM or with a credit card issued in the USA; or if you spent any extended period of time between 1996 and 2006 outside the USA but dependent on a U.S. bank account (i.e. without having a local bank account in local currency in the place where you were staying, you're about to get short-changed in the allocation of more than US$300 million that credit card companies and banks are offering to pay to settle class action lawsuits brought against them for fraudulently concealing and/or misrepresenting their "currency conversion" fees for foreign transactions.

What independent international traveller or expatriate hasn't done all of these things? The proposed settlement is grossly and systematically unfair, especially to long-term independent travellers and expatriates. The documents submitted in support of the proposed settlement make clear that it was prepared by people with no actual understanding of travellers, on the basis of absurd assumptions such as that all cash spent by travellers abroad is carried from home, rather than obtained from ATM's abroad, and that all long-term travellers and expatriates have their accommodations provided for them (presumably by an employer) or have a local-currency bank account abroad from which to pay their rent, and never pay for accommodations with a U.S.-issued credit or debit card or with cash obtained from an ATM using a U.S.-issued ATM card. If the proposed settlement is approved, payments to longer-term travellers will be reduced by up to 90% compared to those who took shorter trips overseas, or even merely day trips across the Canadian or Mexican borders (which are, of course, typically much cheaper than overnight trips abroad).

The lawyers claiming to represent us in the class action tried to get the court to approve the settlement more than a year ago, even before they had figured out how much would be paid to whom. I was in Africa and unable to return to the USA to attend the hearing in March 2008, but I and others successfully objected , and the judge hearing the case said he would postpone a decision until the algorithm for allocating the settlement fund was made known. As now revealed, the algorithm proves to have all of the problems that I anticipated, and others .

Any member of the class of plaintiffs in the lawsuit (that probably includes you, if you used a credit, debit, or ATM card issued in the USA for charges or cash withdrawals in any currency other than U.S. dollars between 1996 and 2006) can object to the proposed settlement, and the proposed algorithm for allocating the money, by writing a letter to the judge.

There's no provision for fax, e-mail, or online submission (unless you are a lawyer who subscribes to the Federal court's electronic filing system), so you need to send your letter by snail-mail to reach the court in New York City no later than Thursday, 30 July 2009. Letters are limited by the court's order to three typewritten pages.

District Judge William H. Pauley, IIIU.S. District Court for the Southern District of N.Y.
Daniel Patrick Moynihan U.S. Courthouse
500 Pearl St., Rm. 2210
New York, NY 10007-1312

A "final" court hearing to decide whether to approve the proposed settlement and allocation is scheduled for 11 a.m. on Thursday, 6 August 2009, before Judge Pauley in Courtroom 11D at 500 Pearl St. in Manhattan. Anyone can attend the hearing. If you want to speak at the hearing, you need to notify the court (in your letter of objection or by a spearate letter) by August 3rd.

I plan to go to New York for the the hearing, at my own expense, to ensure that someone speaks up for the interests of independent long-term travellers. I'll need to leave immediately after the hearing to catch a flight to Chicago for the biennial delegates assembly of the National Writers Union, which begins that evening. But If you'll be at the hearing in New York, and would like to meet in advance, please feel free to contact me.

Because I've previously made a formal objection to the settlement (and thus am an individual "party" to the case as well as a member of the class), and because I want to speak at the hearing, I've formally served my letter on all the other parties. So far as I can tell, you don't need to do that, if you just want to have your letter considered by the judge. But it wouldn't hurt to send copies to the court clerk (to make sure it is filed and made part of the official record, so it can be considered if there is an appeal), and to the lawyers who claim to be representing us. (Much of the source of the problem, I suspect, is that "our" lawyers don't care if the money is allocated fairly. They just want some allocation, any allocation, approved as soon as possible, so they can get their money sooner. They stand to get the same US$75 million cut of the settlement, regardless of how the remainder is divided up amongst their clients.) I've included the most important (although optional) "cc" addresses in the sample letter in OpenOffice format, MS-Word format, Wordperfect format, or PDF format.

On July 2nd, Judge Pauley ordered "our" lawyers to post his order, with the notice of the August 6th hearing and the opportunity until july 30th for comments on the proposed settlement and allocaiton plan, on the settlement Web site . As of today, almost a week later, that hasn't happened, nor is there any mention of these developments on the settlement telephone information line (800-945-9890).

[Update: Within hours after I posted this article to my Web site, the settlement Web site and telephone message were updated to add a notice of the August 6th hearing and to post the latest filings and court order, in belated semi-compliance with the Court's order. The hearing is now mentioned on the home page of the settlement Web site, but there is no mention of the opportunity to submit written comments or speak at the hearing. Instead it says, towards the bottom but in bold-face type, "Please do not contact the Court." Visitors to the Web site, or callers to the phone line, would find that out only if they read all the way through the Court's latest order linked among dozens of other documents near the bottom of this inside page of the Web site.]

Since there is little time for people living or travelling abroad to get letters to New York, much less to arrange to get themselves to New York, in time for the hearing, I'm posting the latest documents I've received below.

Unfortunately, Federal Court documents aren't yet all available online or for free. Some earlier documents in this case linked from multiple pages on the settlement Web site and my previous articles about the case:

It's too late to file a claim for part of the settlement, if you didn't already, unless the Court not only rejects the settlement allocation plan decides to re-open the application process.

The overall settlement amount may seem large (US$336 million before the lawyers' fees and the costs of administering the settlement are deducted), but banks and credit card companies in Canada were recently ordered to pay C$200 million in a similar case in Québec, which has only a small fraction of the population of the USA (although Canadians, including Québecois, do travel and use their credit cards for foreign-currency transactions, such as mail order purchases from the USA, much more than most people in the USA). Some reports aid it was the largest class action judgment ever in Canada. One major difference is that the plaintiffs in Québec, and their lawyers, didn't agree to a settlement of pennies on the dollar for their claims. They took their case to trial -- and won both actual and punitive damages.

Meanwhile, back in the USA, banks and credit card companies are already preparing an end run around the restrictions that the proposed class action settlement as well as proposed laws would place on fees for foreign currency transactions. Instead of a "conversion" fee for "foreign currency" transactions, they are switching to "service" fees for foreign transactions regardless of actual currency (and, in many cases, regardless of the actual location of the merchant). The newly-formed Consumer Travel Alliance tried to get Rep. Barney Frank, chair of the House Financial Services Committee and sponsor of legislation to regulate and require full disclosure of "foreign currency" fees, to amend his bill to extend to "foreign transaction" fees as well. But the credit card bill was passed into law without Rep. Frank, or anyone else, introducing such an amendment. So now it will take a separate bill, or a new approach to enforcement of "truth in advertising" laws against card companies and banks that don't fully disclose their fees in advance.

Finally, if you are looking for for a credit, debit, or ATM card to use while travelling, with the lowest available fees for foreign currency or other foreign transactions, see the list on the Flyertalk wiki page and my previous articles on card terms and conditions in the Money and Finances category of this blog.

"Congress shall make no law ... abridging ... the right of the people peaceably to assemble." (U.S. Constitution)

"Everyone has the right to freedom of movement and residence within the borders of each state. Everyone has the right to leave any country, including his own, and to return to his country." (Universal Declaration of Human Rights)

"Liberty of movement is an indispensable condition for the free development of a person." (United Nations Human Rights Committee)